is tax-free as long as it is to an immediate family member and the proper paperwork is completed. Fees for the registration and title transfer still apply.

Gifting a car in Rhode Island typically involves transferring the vehicle’s title, registering the vehicle, and paying any applicable fees or sales tax.
Involving your recipient in the car shopping process can ensure the vehicle is both affordable and practical for them.
Cars gifted to immediate family members are tax-exempt in the state of Rhode Island, but gifts to non-family members will be subject to sales tax of around 7%.

MORE:

How to save on car insurance costs in Rhode Island

How to buy a car as a gift in Rhode Island

You can only give a car to someone if you own it free and clear—any

car loans

have to be paid off first. The easiest way to buy a car as a gift for someone is by bringing them to the dealership with you so that they can participate in the shopping process.

If you want to give a new car to someone who can’t afford to purchase or finance it, then having them with you for the financing and shopping process will ensure that they get the car that they want and head off any future financial or legal tangles.

Key Takeaway You need to possess the title before you can give a car as a gift, so bringing the lucky recipient to the dealership with you is the best way to purchase a car as a gift.

How to gift a used car in Rhode Island

If you own a car that you want to give as a gift, the best way to go about it is by transferring the title to the recipient. It doesn’t have to be an older car—if it’s a newer car that you’ve purchased outright or just paid off, then you can gift it, too.

If the car is a gift to a family member: It’s tax-exempt. You will need to complete and submit a Tax Exempt Certificate (T-333-1) and a Gift of Motor Vehicle Affidavit Form (SU 87-65).

If your recipient is not a family member: The car is subject to a sales tax of roughly 7% of the car’s value as determined by the

NADA clean retail book value

. You will need to fill out a Sales Tax Form (T-334) to report and pay this tax. These

tax forms

can be found on the Rhode Island Division of Motor Vehicles (DMV) website.

Negotiate the terms of the gift with your recipient

Even given as a gift, a car comes with costs and financial responsibilities—so it’s important you and your recipient agree on the particulars of your gift.

In Rhode Island, there is a $52.50 fee to transfer a title. Car registration is based on weight, so check the DMV’s

Registration and Title Fees

page to calculate what will be due.

Make sure you discuss: Who is going to pay for the title and registration, taxes (if applicable), insurance, fuel, and any other associated costs. You want to make sure that your lovely gift doesn’t end up being an unexpected financial burden.

Here’s a table of some of the average car ownership costs you should discuss with your recipient:

Cost	Rhode Island average
Title transfer	$52.50
Registration fee	Varies by weight
Insurance	$2,183 (minimum only)$2,312 (full coverage) per year
Maintenance	$1,100 per year
Fuel	$800 to 1,200 per year

Record the gift with a bill of sale

Even though nothing is being bought or sold, the transaction still needs to be recorded with a

bill of sale

or an Affidavit of Gift of Motor Vehicle (SU 87) to keep things nice and legal.

This should include the nature of your relationship with the giftee and all pertinent information about the car, such as:

Make

Model

Vehicle identification number (VIN)

In the case of a gift, the “sale” price can be listed as zero.

Make sure you and your recipient both sign the bill of sale and include it with the other tax and transfer paperwork.

Transfer the vehicle title

If the car is a model year 2001 or newer, they will need to be in possession of the certificate of title and get it transferred over. If it’s older than that, you’ll just need the previous vehicle registration.

Fill out and sign an Application for Registration (TR-1) form and use the registration document checklist to make sure you’ve got all the correct paperwork and the proper tax forms for the situation.

Pro Tip As of September 2021, Rhode Island began requiring a
VIN check
when registering all vehicles from 2001 or newer. This can be done at a local police station.

Now that the paperwork is sorted out, make an appointment at the

Rhode Island DMV

office of your choice to pay the fees and complete the transfer.

Purchase Rhode Island liability insurance—or full coverage

The final step? Make sure that the car has insurance that meets

Rhode Island’s car insurance requirements

. Once that’s done, your giftee is free to drive across the state!

“I can’t thank the
Jerry
app enough! They saved me $160 a month, and I didn’t even have to talk over the phone. They took care of everything through text.” —Travis Y.

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